About My Credit Card Debt
If you’re a newer reader, you may have some concerns about my high levels of credit card debt. I’m actually taking money from 0% APR balance transfer offers and instead of spending it on junk, I am placing it in high yield savings accounts that earn me 5% interest or more, and keeping the difference as profit.
Along with other things, this helps me earn extra side income of thousands of dollars a year. Recently I put up a series of step-by-step posts on how I do this. Please check it out first if you have any questions. This is why, although I have the ability to pay the balances off, I choose not to. Also mixed in are our monthly credit card charges, which we do pay off each month.
Commentary
Cash Savings, Midterm Goal Done. We have successfully reached our mid-term goal of $100,000 to put towards a house downpayment. This goal was set initially on April 2, 2005 – right here on this blog, with a deadline of mid-2007. Since then, I quit my 9-5 job, went back to school, changed fields, and now work both on my own independent ventures and a salaried “W-2” job. That transition set us back, but we finally got there, just 6 months late. 🙂
Of course, now we have to set another mid-term goal. For now, I think a proper goal would be probably to keep accumulating more cash, as if we do have to buy a house there are tons of other costs like closing costs, mortgage points, moving costs, initial home repairs, and so on to worry about. Not to mention also keeping an emergency fund, which is pretty critical once you have a mortgage to worry about.
Retirement and Brokerage accounts. Our investments overall have dropped about 2-3% since last month. We have again juiced up our retirement contributions this month, because unlike IRAs, the 401k contributions for 2007 have be in by the end of the year to count under the 2007 annual contribution limits. Thanksgiving managed to sidetrack me from my asset allocation series. It must be done by 2008!
You can see our previous net worth updates here.
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That is a very nice increase considering the market performance in November. Of all the bloggers that post their networth changes, including myself, alot of us had a minimal increase or a decrease last month.
Impressive growth for the month. It’s nice to see you’ve got several thousand in BT money floating around out there.
If you don’t mind me asking, how many different bank accounts do you use, for both your regular cash that you’re planning on using for a down payment, and also for BT monies – and do you keep BT monies separate from your other cash if it’s in a savings account or something (obviously CD’s would be separate…)
Holy moly…..a $9k increase in cash alone? Way to go!! Mind if I ask how you did it?
Someone who has the money that you have
will not be subjected to “mortgage points”
How much matching do you get on your 401k and when do they vest?
-Raymond
IIRC you have self-directed 401K, right? I believe you have the same rules as IRAs as far as being able to contribute for a particular year up to April 15th of the following year. At least that’s what I have been doing for several years.
CONGRATULATIONS! I hope I can someday achieve that same goal. It must feel great. This is a very nice early Christmas present for you guys. Keep up the good work and keep us updated. This sort of news from a regular guy and not a Wall Street maverick gives the rest of us hope for our financial future.
Wow, the power of two people saving toward one goal is impressive.
Having more cash than you think you will need on hand when purchasing a home is a good thing. Having a healthy emergency fund that will cover six months of costs AFTER home purchase is also a good goal to have.
Congratulations on the impressive progress!
Scott – I’m pretty sure you need to get in your contributions by years-end, even for a Self-Employed 401k. For a SEP-IRA, you have until April 15th.
Thanks for the good thoughts everyone 🙂
Clarification – For a Solo 401(k) employee salary deferrals must be contributed by end of year, Employer contributions have until tax filing deadline. However, the plan must be opened by the end of 2007 for there to be any 2007 contributions (unless you set a different fiscal year).
So, if you only made $15,000 in self-employed income and you wanted to put all $15,000 into the Solo 401k (one of the advantages of Solo 401k over a SEP-IRA), that would have to be done primarily a employee salary deferral, so you’d need it to be done by the end of the year.
This contribution was actually for my wife’s 403b plan, which is not self-directed.
Congrats! All you need now is to find your perfect home!
again to the 401k deadline:
What is the deadline for making salary deferral contributions?
For unincorporated businesses the deadline is the tax filing date of April 15 of the next year plus extensions. For incorporated businesses the deadline is 15 days after the close of the fiscal year. For instance if December 31 ends the fiscal year, make contributions by January 15 of the next year.
according to http://www.bcmadvisors.com/solo_401k/faqs.htm
does anyone know when the last day to contribut to a roth IRA is for 2007? I thought it was April 15, 2008, but not sure.
Yes, Andrew – correct – some custodians make previous year contributions easier than others so be sure to check that you’re actually putting Roth money towards the tax year in question.
Nice Work!
Congratulations Jonathon!
I recently discovered your blog, and can’t tell you how helpful it’s been in helping me set and meet my own financial goals!
Woohoo! Great job hitting $100k. I am slowly getting a control over my own numbers, and reading your blog has been a great inspiration in my journey.
out of all your accounts, what is the purpose of your 529?
The one problem I see with applying for too many credit cards is that the number of “pulls” re your credit rating can have an adverse effect on one’s credit score. No? And what of accounts that are dormant?
Sign me,
Learning about money
Congratulations.
Brian – Yes, you are correct for sole proprietorships. I’ve been just focused on corporations (mine is a corp), so the Jan 15 takes into account the end of year for withholding by payroll + max 15-day delay before contributions are actually deposited. I didn’t know that sole-props could wait that long.
Sophia – Thanks, setting a goal really did help me focus my efforts. Even if you don’t reach it exactly, it helps you prioritize.
Congrats! I have a couple questions…
Is this you and your wife/gf’s combined finances?
Are you going to wait till housing comes down a little?
this might seem to be a newbie question. But won’t your credit rating suffer due to huge credit card debt. Or are you ok with that?
Anshuk – read his column on 0% Balance Transfers… to your question if you have a great score it doesnt hurt you much
Very nice. A few months ago I started a using a bunch of the financial tricks from the site and have been able to squeeze out a few hundred bucks a month, you’re an inspiration.
Congrats on the progress. Where does your free cash reside ?. What interest rate are u getting for the same ?.
I see you have reached one goal.
Do you mind making public your expenses?
Also, how much money do you consider enough to stop doing credit card offers and soliciting referrals?
Anshuk – Also please check out this Q&A part of the guide. Thanks!
nil – My current bank setup, I’m using Everbank’s promo rate right now.
Jed – I’m probably not going to detail my expenses. For one, I don’t track them closely. I think my net worth is revealing enough for now. Perhaps when I am independently wealthy I will stop making money on the side, but it’s kind of a fun hobby, so maybe not.
You go girl!!
Oppps I mean you go boy!
Yo Jon,
I don’t mean to count your money, but I noticed you’ve added roughly 10 grand to your cash reserve in a month … I know you have no kids, no mortgage, and both of you work, but still, how the hell do you amass ten large in four weeks ?
Hard work and clean livin’ 😀
It’s all relative. If you live in Kansas that might look like a large cash balance, but if you live in or near any major city (e.g. NYC, LA, Bay Area, Boston, etc) than it is nothing. Here in New York that isn’t even enough to put a downpayment on a 1-bedroom apartment. But then again salaries are higher too, pretty much everyone I know is in their 20s or early 30s and makes 6-figures, some make high 6-figures or even 7-figures (wall street). Heck, our receptionist makes close to 6-figures and she’s just a 22 year old girl. But housing is costly unless you want to live in a crappy area.
Most people in NY agree that you need to make at least $250k just to be middle class, anything below that and you’re working class or lower-middle class at best. That’s why I get shocked when I see pictures of big houses you can buy in places like Kansas for about what I make in 1 year. But of course the downside is you have to live in Kansas.
I live in Kansas…and I believe that you have never been here JD…
I have lived up and down the west coast, in Texas and have to tell you that there is no place like home…
I can make 1/3 of what you make, live in a nicer house and have 1/2 the stress of you JD…gosh, I could make what you make and actually do quite nice….
All I am saying is don’t knock something until you try it…better yet, stay in your rat race and let me enjoy things here…
Congratulations on accumulating the cash. I am just wondering if you really need to drop all $100k into the house down payment. I have no idea what size house you are going for, but it seems like you could invest half of that in something else and make more of a return long-term. Housing is not liquid and I read somewhere that the average return of the investment long-term is something like 5%. Some housing markets have done better in short-term, but with the uncertainty of the market now, $50k down should get you a great house – especially with prices going down. I am just thinking out loud…but, it is wonderful that you have the discipline to save the money.
Ingrid, sorry to burst your bubble but $50k won’t be enough for a down payment on a decent house in any popular metro area. Where I live you need at minimum $100k-$150k for a down payment on a starter home. But it is all relative like others have said, over here a $150k salary for a young single person is very common. I know I can buy a mansion in the midwest for what I would pay for a little starter home here but I would never move to the midwest. Like most career driven people I left the midwest to go to a large city, and now I’m doing things in my career that would never be possible where I grew up. Basically, there is a big disconnect in personal finance numbers between people from major metro areas versus people in the midwest and south (e.g. blue vs. red states). When I talk with my parents or friends and relatives back home in Cleveland, they are shocked by how much I make and likewise I am shocked by how little they make. My “professional” friends back home are earning salaries of around $60k (we’re in our 20s), but where I live now even 19 year old interns in my office make more than that. So it isn’t easy to compare. This trend is only getting stronger and stronger with the “brain drain” becoming more and more pronounced and moving towards the metro areas and their surrounding suburbs.
Then again, there are always losers out there who think anyone who likes to work hard, be successful, and have an important career is “stuck in the rat race”. I guess we should all be mindless peasants and we can become a third world country again.
$150,000 annual HHI, $350,000, 4500 sq ft house, three kids with land to ride horses, no debt…hardly a peasant
One last thing regarding your mindless peasant comment
When you use your Garmin GPS, that is a Kansas company
When you use your Sprint phone, that is a Kansas company
When you order your Pizza Hut pizza during the super bowl, that was a company founded in Kansas…and if you decide to buy a Tony’s pizza at the store, that is from Kansas
When you fly your Cessna plane or Lear Jet, or your Boeing 737, that was made in Kansas
If you ship something, Yellow Frieght is a Kansas company as is Seaboard Corporation
Trey, I know you are frugal, and shop at Payless Shoesource…that is a Kansas company, and they also own the Dexter shoe company
But since I live in a suburb of Kansas City, let me tell you about our nice city as well…
Since it is tax time, you can walk into you local HR Block, and get your taxes done…KC based
I am sure that you love movies…be sure to visit your local AMC Movie theatre…KC based
I am sure that you are a sports fan…every major stadium architecture firm is based in KC
You can send me a Hallmark Card, which is based in KC…
Thanks for your stereotypes Trey…goodbye
Do you mind if I ask how old you are? Is the networth a combined result with your wife?
29, yes. More info can be found at the About Me page. 😀